July 14, 2021

Debt Fix: Who can help?

Debt Fix: Who can help?

There are many reasons why people face financial difficulties, and at Credit Counsellors Australia, we understand that the circumstances behind these financial worries are different for everyone. It is important to know that help is available. Credit Counsellors are here to support people facing the burden of debt Australia-wide. In this article, we’ll uncover the many ways everyday Australians can get their debt fixed, so they can stop worrying about money troubles and start looking forward to a debt-free future. 

Review Your Debts and Budget

You may have heard the phrase: “You can’t manage what you can’t measure”. Well, the saying also applies to your personal finances. Whether you prefer using a pen and paper, a spreadsheet or even an app – list down income, expenses and debts. When you’re in trouble financially, looking into your budget can be a scary thought! However, without knowing where your money is going, it will be hard to justify your financial position to your creditors or any parties you may need to enlist for help. Whilst you’re at it, obtain a copy of any documentation related to your hardship (i.e. redundancy letters, medical certificates etc.) in case you need to supply it as part of any application. 

Assess Which Debt Option is Best for Your Circumstances

There are a number of informal and formal options available for people who are struggling with debt. Getting a better idea of the type of assistance best suited to your needs will help you figure out who to contact and prevent you from wasting your time or acting on the wrong advice. 

Informal Debt Options

Hardship Variation

Financial hardship arises as a result of being unable to repay a loan either when it was originally obtained, or due to an unfortunate change of circumstances. Note that under the Australian National Consumer Credit Protection Act 2009, creditors must issue a default notice providing 30 days before further action will take place, and those in debt have the right to apply for a hardship repayment arrangement (given certain conditions). Simply get in touch with your creditor (in writing) to request a hardship application and a hold on further action until a specified date. Also, request that they do not list this as a default on your credit file or report the overdue repayments on your credit report (if they agree to an arrangement but continue to report the payments as late, you can lodge a complaint with AFCA) (also, note these upcoming amendments to credit reporting legislation which protects borrowers from being refused credit on the basis of past hardship). Some creditors have a formal application, but others won’t. If there is no formal hardship application available, make sure you provide sufficient information (including an explanation of your circumstances, a full breakdown of your budget and any relevant documentation) for your creditor to assess your circumstances and verify your hardship request. It’s important to be reasonable, honest and forthcoming with the information you provide to creditors, because if you make an offer of repayment that is too low, and/or provide inadequate information, your application can be refused. Lastly, it’s better to be realistic about what’s possible for you to achieve, rather than agreeing to a repayment arrangement that you cannot afford. Also, consider that your creditors will make agreements with you and decisions about your account based on your track record. Multiple broken arrangements on an account looks worse than providing multiple honest updates about how your situation is progressing.  

Debt Negotiation and Debt Settlement

If you have a small amount of debt (less than $5K) and there is room in your budget to service an ongoing repayment, or you expect a lump sum of money in the near future, you may be able to negotiate an arrangement with your creditor/s to pay the debt off via a payment arrangement, or request to hold off on further recovery action until the date by which you expect a payout to be able to settle the debt. If you are behind on repayments or request settlement for an amount less than the total amount owed, it’s not likely that the creditor will agree or put a pause on interest or late fees – but it can’t hurt to ask – the worst they will say is “no”. Make sure to get a record of any debt negotiation or settlement in writing from your creditor, and bear in mind that it is common for such arrangements to include a “default clause”, which means that if you default, the creditor may pursue you for the full amount owing and re-instate fees/interest.

Formal Debt Options Under the Bankruptcy Act (1966)

Temporary Debt Protection (TDP)

Lodgement of a TDP form requires you to provide a detailed outline of your financial affairs and provides a 21-day protection period from the date of lodgement, during which time unsecured creditors (plus bailiffs and sheriffs) cannot take any further enforcement action to recover unsecured debts (but they can start or continue legal action). TDP gives you more time to restructure your finances, consider your options and negotiate with your creditors. It is important to note that TDP is formally known as a “declaration of intention to present a debtor’s petition”, and is considered an act of bankruptcy – however, the good news is that you are not automatically made bankrupt at the end of the 21-day timeframe. Note also that whilst it doesn’t appear on the NPII, lodging a TDP request is an indication to your creditors that you may be insolvent (unable to repay your debts), and creditors can use this as a justification to apply for a creditor’s petition through the courts to have you declared bankrupt. To find out more about TDP and how to lodge a temporary debt protection form, click here <https://www.afsa.gov.au/insolvency/cant-pay-my-debts/what-temporary-debt-protection-tdp>. 

Part 9 (IX) Debt Agreement

A debt agreement is a legally binding agreement with your creditors, where it is negotiated that you pay back an affordable percentage of your total debt over a 3- or 5-year period. Rather than you having to make payments to each creditor you owe money to, the debt agreement is overseen by a debt agreement administrator who ensures that all parties comply with the terms of the debt agreement. As they are lodged with AFSA, debt agreements are subject to a strict set of eligibility criteria:

  • You must be insolvent.
  • Within the past 10 years, you must not have been declared bankrupt or have entered into a debt agreement or personal insolvency agreement, and
  • Your unsecured debt, assets and income must be less than the indexed amount.

By entering a debt agreement, your name will appear on the NPII (National Personal Insolvency Index) for up to 7 years, and if you fail to adhere to the terms of the debt agreement, your creditors can lodge a creditor’s petition. In order to service the payments required in a debt agreement, you will also need a source of income. However, debt agreements are a flexible alternative to bankruptcy. In addition to simplifying the schedule of payments that you will need to make; interest is usually paused and your unsecured creditors are required to contact your debt agreement administrator instead of contacting you directly. You may also be able to keep certain assets and avoid some of the heftier restrictions of bankruptcy (such as keeping your passport, remaining a homeowner, and retaining your status as a company director). Debt agreements require that a 50.01% proportional majority of unsecured creditors accept the agreement, for it to become binding. If you are staring down the barrel of bankruptcy, it can be worthwhile exploring whether the flexibility of a debt agreement could be a better option for your circumstances. If you have any questions about how a debt agreement works, contact us on 1300 003 328 for a confidential, obligation-free chat.

Part 10 (X) Personal Insolvency Agreement (PIA)

If the flexibility of a debt agreement and the ability to retain certain assets (like your house or car) seems like an ideal solution for your financial circumstances, but your income, assets and/or unsecured debts fall outside of AFSA’s Indexed Amounts, a PIA might be a worthwhile alternative to filing bankruptcy. In a PIA, a Trustee will be appointed to manage your assets and negotiate with unsecured creditors as to the length of the agreement, the interest, fees and charges, and the amount you are required to pay back. Debts under a PIA can be subject to a “release clause” – meaning you will be released from having to repay the full amount of the debt once your obligations are fulfilled under the PIA – but some debts may NOT be covered by such a clause, meaning such creditors can still pursue you for debts still owing after the agreement ends. The terms and conditions of a PIA are drafted on a case-by-case basis, and a 70.01% proportional majority of the unsecured creditors to a PIA proposal must agree to the arrangement for it to become binding. For further information about Part 10 (X) PIAs, contact us on 1300 003 328 for a confidential, obligation-free chat.


Whilst it’s feared and often misunderstood, Australian Bankruptcy Law is actually designed to protect individuals from crippling debt and provide creditors with a means of getting outstanding debts settled. Bankruptcy can release you from most debts and relieve you of the stress of struggling to make repayments – and whilst, yes, there are consequences – for many people, bankruptcy represents an opportunity to make a fresh start financially! Bankruptcy is usually the last resort people take, so it’s important to explore all of your options and speak to a professional so that you understand the implications before you file. For more information about the consequences of bankruptcy, click here.

Facing insolvency often means facing a lot of uncertainty, but that doesn’t mean you should have to struggle on your own. Having an insolvency professional such as Credit Counsellors on your side can significantly reduce that stress and uncertainty because by choosing our service, you are guided by a qualified professional and will walk away being well informed. If you need a consultation, our team can discuss your circumstances with you in a confidential setting and free of charge. So, call us on 1300 003 328 or email enquiry@creditcounsellors.com.au to request a debt assessment, and start exploring your debt options today.

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